Let us now focus on next attribute of successful R&D management: Razor sharp focus on a strategic niche. As we have seen:

This goes back to Steve’s philosophy that the most important decisions are the things you decide NOT to do, not what you decide to do.

Again, I will be gleaning information from several sources to see if we can build a better picture. Let us start off with the information from the transcript of an interview with ex-Apple CEO John Sculley and see what we can learn...Just to recap, the strategic niche for Apple was the absolute best user interface (or at least what Jobs would consider the best) and an industrial design to go with it:

Here’s someone who starts with the user experience, who believes that industrial design shouldn’t be compared to what other people were doing with technology products but it should be compared to people were doing with jewelry… Go back to my lock example, and hinges and a door with beautiful brass, finely machined, mechanical devices. And I think that reflects everything that I have ever seen that Steve has touched.

This strategic choice forces many decisions along the way. Some of them might not be popular, but Jobs clearly made them to stay true to the strategic niche:

Steve believed that if you opened the system up people would start to make little changes and those changes would be compromises in the experience and he would not be able to deliver the kind of experience that he wanted.

The strategic niche is a thread that tied EVERY aspect of Apple's business together:

Absolutely. The user experience has to go through the whole end-to-end system, whether it’s desktop publishing or iTunes. It is all part of the end-to-end system. It is also the manufacturing. The supply chain. The marketing. The stores. I remember I was brought in because I had a design background and because I was a marketer. I had product marketing experience. Not because I knew anything about computers.

As we all know, Apple has a unique way to do its marketing that is tied in with the overall user interface focused strategic niche:

Steve loved those ideas. A lot of the stuff we were doing and our marketing was focused on when we bring the Mac to market. It has to be done at such a high level of perception of expectation that he will sort of tease people to want to find out what the product is capable of.

The same goes for advertising:

Most big companies delegate it way down in the organization. The CEO rarely knows anything about the advertising except when it’s presented, when it’s all done. That’s not how we did it at Pepsi, not how we did it at Apple, and I’m sure it’s not how Steve does it now. He always adamantly involved in the advertising, the design and everything.

It may not be possible for every leader to be as involved in every decision as Jobs was, but the next best would be to hire the right people to make those decisions and guide them appropriately. An example is the Apple stores (wildly more successful than any competitor)

He brought one of the top retailers in the world on his board to learn about retail ( Mickey Drexler from The Gap, who advised Jobs to build a prototype store before launch). Not only did he learn about retail, I’ve never been in a better store than an Apple store. It has the highest revenue per square foot of any store in the world but it’s not just the revenue, it’s the experience.
Apple stores are packed. You can go to the Sony center — go in the San Francisco center at the Moscone. There’s nobody there. You can go into the Nokia store, they have one in New York on 57th St. There’s nobody there.

It is also critical to emphasize the strategic niche in every aspect of the company's business:

Once you realize that Apple leads through design, than you can start to see, that’s what makes it different. Look at the stores, at the stairs in the stores. They are made of some special glass that had to be fabricated.

Or here is an example from tying the user centric design strategic niche to manufacturing:

He was fascinated by the Sony factories. We went through them. They would have different people in different colored uniforms. Some would have red uniforms, some green, some blue, depending on what their functions were. It was all carefully thought out and the factories were spotless. Those things made a huge impression on him.
The Mac factory was exactly like that. They didn’t have colored uniforms, but it was every bit as elegant as the early Sony factories that we saw. Steve’s point of reference was Sony at the time. He really wanted to be Sony. He didn’t want to be IBM. He didn’t want to be Microsoft. He wanted to be Sony.

However, this may not be easy at all times. For example, Sony was an analog component focused company while Apple was focused on user experience. Jobs had to modify the Sony manufacturing processes to better suit Apple's culture. The wired article The Untold Story: How the iPhone Blew Up the Wireless Industry shows us how following a strategic niche can be very expensive, but it can pay off if followed wisely:

The conversation about which operating system to use was at least one that all of Apple's top executives were familiar with. They were less prepared to discuss the intricacies of the mobile phone world: things like antenna design, radio-frequency radiation, and network simulations. To ensure the iPhone's tiny antenna could do its job effectively, Apple spent millions buying and assembling special robot-equipped testing rooms. To make sure the iPhone didn't generate too much radiation, Apple built models of human heads — complete with goo to simulate brain density — and measured the effects. To predict the iPhone's performance on a network, Apple engineers bought nearly a dozen server-sized radio-frequency simulators for millions of dollars apiece. Even Apple's experience designing screens for iPods didn't help the company design the iPhone screen, as Jobs discovered while toting a prototype in his pocket: To minimize scratching, the touchscreen needed to be made of glass, not hard plastic like on the iPod. One insider estimates that Apple spent roughly $150 million building the iPhone.

The question is what should an R&D manager do when different elements within the strategic niche conflict with each other. For example, Jobs was focused on BOTH user experience and industrial design:

Because Steve’s design methodology was so correct even 25 years ago he was able to make a design methodology – his first principles — of user experience, focus on just a few things, look at the system, never compromise, compare yourself not to other electronic products but compare yourself to the finest pieces of jewelry — all those criteria — no one else was thinking about that.

What would happen when strategic choices pitted user experience vs. industrial design? Apple selected user experience. Here is an example. This is what the Japanese engineers had to say about the original MacBook Air: No Waste Outside, Nothing but Waste Inside'

Can we say that the MacBook Air has a perfect, sophisticated external appearance, but its insides are full of waste?' asked Mayuko Uno, a squad member, as if speaking for the engineers that had finished the teardown process.

"We were impressed by Apple's commitment to good design while seeing the LED lamp that is located on the decorative laminate around the display and is lit when the camera is in use."

So, if push came to shove, Apple was willing to compromise on everything but the user experience. Jobs was also willing to spend resources and make unpopular decisions to maintain the strategic niche around user experience. This is a pretty important lesson for all of us to learn. That is the level at which we need to define a strategic niche to develop successful products.